President Obama's Dreadful Debt Speech

Where to begin? Let's start with the lone bright spot of President Obama's otherwise execrable speech this afternoon. He was pretty effective in laying out the scope and depth of our looming debt troubles. Some of this could have been recapitualted, almost verbatim, by Paul Ryan:

Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond. That means we’ll have to keep borrowing more from countries like China. And that means more of your tax dollars will go toward paying off the interest on all the loans we keep taking out. By the end of this decade, the interest we owe on our debt could rise to nearly $1 trillion. Just the interest payments.

Then, as the Baby Boomers start to retire and health care costs continue to rise, the situation will get even worse. By 2025, the amount of taxes we currently pay will only be enough to finance our health care programs, Social Security, and the interest we owe on our debt. That’s it. Every other national priority – education, transportation, even national security – will have to be paid for with borrowed money.

Ultimately, all this rising debt will cost us jobs and damage our economy. It will prevent us from making the investments we need to win the future. We won’t be able to afford good schools, new research, or the repair of roads and bridges – all the things that will create new jobs and businesses here in America. Businesses will be less likely to invest and open up shop in a country that seems unwilling or unable tobalance its books. And if our creditors start worrying that we may beunable to pay back our debts, it could drive up interest rates for everyone who borrows money – making it harder for businesses to expand and hire, or families to take out a mortgage.

That's when things started to head south. The president's problems arose from (a) his disingenuous blaming of President Bush (surprise!) for much of the current mess -- cheerfully ignoring his own role in doubling the national debt in 5 years, and tripling it in 10; and (b) his nonexistent plan "vision" to actually address the dire challenges he described. After what seemed like an interminable series of dishonest attacks and demagoguery against Paul Ryan's plan (it allegedly abandons the elderly, the poor, the infirm, and especially sick children, leaving them to "fend for themselves"), the president finally outlined the core elements of his approach. In short: More spending, higher taxes, building on Obamacare, and somehow achieving magical "savings" of $4 Trillion over the course of 12 years in the process.

More spending ("Investments," in Obamaspeak), coupled with non-specific cuts:

We will make the tough cuts necessary to achieve these savings, including in programs I care about, but I will not sacrifice the core investments we need to grow and create jobs. We’ll invest in medical research and clean energy technology. We’ll invest in new roads and airports and broadband access. We will invest in education and job training. We will do what we need to compete and we will win the future.

By contrast, Obama claimed the Ryan budget demands cuts so draconian that "if our roads crumble and bridges collapse, we can't afford to fix them." Without a shred of irony, he later condemned the Beltway culture for "petty bickering."

[Another element of] our approach is to reduce spending in the tax code. In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans. But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. And I refuse to renew them again.

Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like home ownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of$75,000 while doing nothing for the typical middle-class family that doesn’t itemize.

My budget calls for limiting itemized deductions for the wealthiest 2% of Americans – a reform that would reduce the deficit by $320 billion over ten years. But to reduce the deficit, I believe we should go further. That’s why I’m calling on Congress to reform our individual tax code so that it is fair and simple – so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford.

Here, the president yanked the extension of all current tax rates off the table, even though he claimed that "everything" should be "on the table" elsewhere in the speech. He also endorsed his debt commission's tax code simplification recommendation, a version of which is included in Paul Ryan's plan. Both Simpson/Bowles and Ryan call for across-the-board rate reductions in addition to a simplification regime, which would broaden the tax base via the elimination of endless deductions. So the president explicitly embraced this plan...but curiously also demanded higher taxes on "the rich." I'm not sure how to reconcile these competing preferences.

Speaking of those awful rich folk, much of the president's tax rhetoric was laden with intense class warfare. He repeatedly stated that "millionaires and billionaires" need to pay their "fare share" of taxes (Quick fact: The top 1 percent of earners already pay nearly 40 percent of all income taxes in America) to help "win the future." He also channeled candidate Joe Biden by suggesting that paying ever higher shares of one's income to the federal government is a patriotic act. In a nutshell, he plans to raise taxes on successful job creators and businesses -- even in the midst of a recession -- because they can "afford it."

Hail Obamacare!

The president premised many of his vision's "savings" on the deeply flawed notion that Obamacare lowers costs and reduces deficits:

Already, the reforms we passed in the health care law will reduce our deficit by $1 trillion. My approach would build on these reforms. We will reduce wasteful subsidies and erroneous payments. We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency and speed generic brands of medicine onto the market. We will work with governors of both parties to demand more efficiency and accountability from Medicaid. We will change the way we pay for health care – not by procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results. And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services seniors need.

Actually, no, the reforms "passed in the health care law" will not reduce the deficit, nor bend the cost curve down. Beyond that, the president ignored all of his debt commission's recommendations on Medicare and Medicaid -- programs which he himself has acknowledged are the "biggest drivers" of our debt. Instead, he offered big, juicy nothingburgers: Increased "efficiency," fewer "wasteful subsidies," more "accountability," etc. These platitudes do not constitute a plan. Irony: Earlier in his remarks, he mocked other politicians for promoting promises of reducing waste and inefficiencies as actual plans:

"Politicians are often eager to feed the impression that solving [the debt] problem is just a matter of eliminating waste and abuse..."

Indeed they are, Mr. President! As highlighted in the previous quote, Obama's one concrete plan to lower healthcare costs is the application of government rationing by the bureaucrats at IPAB. And if the rationing isn't quite enough, he said, we'll "strengthen" the panel to ration harder. A comforting thought. Rationing aside, the president applied the underpants gnomes approach to achieving entitlement-preserving savings:

o Make Medicaid more flexible, efficient and accountable without resorting to block granting the program, ending our partnership with States or reducing health care coverage for seniors in nursing homes, the most economically vulnerable and people with disabilities. Combined Medicaid savings of at least $100 billion over 10 years.

o Reduce Medicare’s excessive spending on prescription drugs and lower drug premiums for beneficiaries without shifting costs to seniors or privatizing Medicare. Combined Medicare savings of at least $200 billion over 10 years.

If you can find a plan in there, please email me immediately. I'd love to break the story. This brings me to my final point. It would not be accurate to call the president's speech a "plan" and any real sense. It certainly contained anti-plan elements (vis-a-vis Paul Ryan's blueprint) but offered no specifics on actual entitlement reform, aside from handing off the task of real plan formation to (yet another!) bipartisan group, this time in Congress:

In early May, the Vice President will begin regular meetings with leaders in both parties with the aim of reaching a final agreement on a plan to reduce the deficit by the end of June. I don’t expect the details in any final agreement to look exactly like the approach I laid out today. I’m eager to hear other ideas from all ends of the political spectrum.

Well, Mr. President, it would be rather difficult for this mystical bipartisan plan to "look exactly like" something that doesn't exist, so I wouldn't worry too much about that. Also, are you authentically interested in hearing ideas "from all ends of the political spectrum"? I ask because moments before you uttered those words, you spent ten minutes lying about an approach largely embraced by virtually an entire end of the political spectrum. You also said the same thing about healthcare reform, and your final plan was so bipartisan that it received exactly zero Republican votes in Congress. Pardon my skepticism.

Bottom line: If American taxpayers were hoping to hear concrete, courageous, politically-risky solutions to our looming debt crisis, they might as well have followed the Vice President's lead.